Economic-impact studies: Old data, faulty memories sow confusion

The USA Pro Cycling Challenge brought world media to Durango as well as thousands of spectators. But it’s unclear just how much economic aid special events such as the bicycle race help the economy. Economic-impact studies, as many economists admit, are tricky things.

Durango Herald file photo

The USA Pro Cycling Challenge brought world media to Durango as well as thousands of spectators. But it’s unclear just how much economic aid special events such as the bicycle race help the economy. Economic-impact studies, as many economists admit, are tricky things.

Economic impact. It’s a buzzword that echoes across the economic development community, spurs support for special events and rally sponsorships among local businesses.

A number of organizations have attempted to calculate the economic impacts of their work including events they host, most for an understandably self-interested purpose: to validate their efforts.

“(Organizers) want to show they’re going to benefit the community and that people in the community should support them,” said Deborah Walker, an economics professor at Fort Lewis College who oversees many of the economic-impact studies the college produces.

The studies produce a way to measure the value and “legitimize the impact” of events such as the Iron Horse Bicycle Classic and Taste of Durango beyond the anecdotal, said Bob Kunkel, the city’s downtown business development manager and former executive director of the Business Improvement District.

But it’s a tricky task calculating how much special events such as performances, festivals and parades boost local spending and how the influx of dollars ripples outward to the greater economy.

The anatomy of an economic-impact study

Students and professors at Fort Lewis College have produced numerous economic impact studies of institutions, businesses and events in the region. The college has studied two events in La Plata County, the Durango Independent Film Festival and Ignacio Bike Week. The studies are based on surveys with attendees, vendors and organizers that ask about event-related spending including hotel nights, meals and supplies required to put on the event.

Such spending is then multiplied by a number, determined by the Bureau of Economic Analysis, that reflects how long a dollar spent on the event recirculates in a community within a specific region.

The Bureau of Economic Analysis’ formulas incorporate data from many different sources, but even those numbers have their limitations. Input-output numbers that reflect how much each industry consumes to produce a product or service are based on 2002 numbers that may not incorporate changes caused by the recession in certain industries, said Zoe Ambargis, regional economist and section chief with the Bureau of Economic Analysis.

Using the multiplier for one-time events also is problematic because the numbers are supposed to reflect industry spending over an entire year, rather than just a few days, Ambargis said. It also makes it difficult for studies to make assumptions about jobs created because the impact is so short-term, said Walker, who oversees most of the event-related impact studies.

Multiplier numbers reflect that a dollar recirculates less in rural areas because the limited amount of goods produced here cause businesses and people to more often look outside the area for necessary supplies and services.

So even if the amount spent is significant, it comes in, quickly recirculates and leaves the community in a relatively short amount of time.

There’s also an inherent chance for inaccuracy when surveys base their data on people’s recollection of things such as spending, said Robert “Tino” Sonora, economics professor at Fort Lewis College and director of the college Office of Business and Economic Research, which produces impact analysis of companies, the college and special events.

Sparser and smaller populations in the area also limit the sample size for various studies, Sonora said.

In a place like Durango, you “don’t really get to take advantage of the law of large numbers” he said. “That’s why micro-level data is problematic. There are idiosyncrasies. It’s really nice to have, but it is problematic”

The Fort Lewis College Concert Hall is still looking for a way to use the data from a study detailing the economic impact of nonprofit arts and culture organizations and their audiences here, Director Charles Leslie said.

The Durango Area Tourism Office assesses how its marketing efforts translate into media coverage, visits to Durango and engagement with the organization’s social- media sites and websites, but doesn’t follow that directly to economic impact.

The Business Improvement District also gauges the impact of grants it gives to various organizations for special events. The Business Improvement District requires event organizers to provide a recap of event attendance and estimated economic impact before it hands over the money. The intent is to direct money toward events that attract significant numbers of out-of-town visitors, said John Wells, a BID board member.

While BID does require an event recap report, as a general practice it could be helpful for organizers to do a better job justifying their events to local business owners who are most affected by street closures or tents in front of their stores, Kunkel said.

The improvement district has never tried to add up the total economic impact of the events it helps support, he said.

Neither the city of Durango nor La Plata County has done any in-depth analysis of the economic impact of the various festivals and events that happen throughout the year. Both entities used crowd and media-impact estimations when they decided to pitch in a total of $75,000 to help sponsor the USA Pro Cycling Challenge.

The city of Durango is now performing a comprehensive economic-impact analysis of the event.

County commissioners don’t follow a strict, financially based rule to funding decisions, said Karla Distel, county finance director.

“It depends on how those studies impact (the commissioners’) perception of how (the events or organizations) benefit the community,” Distel said. “It’s just how convincing or compelling your case is to policy makers.”